LB318 LB318
2023 2023
LEGISLATURE OF NEBRASKA
ONE HUNDRED EIGHTH LEGISLATURE
FIRST SESSION
LEGISLATIVE BILL 318
Introduced by Bostar, 29.
Read first time January 11, 2023
Committee: Revenue
1 A BILL FOR AN ACT relating to revenue and taxation; to amend sections
2 77-3605 and 77-3606, Reissue Revised Statutes of Nebraska, and
3 sections 71-1962, 77-2715.07, 77-2717, 77-2734.03, and 77-3604,
4 Revised Statutes Cumulative Supplement, 2022; to adopt the Child
5 Care Tax Credit Act; to reauthorize tax credits under and change
6 provisions relating to the School Readiness Tax Credit Act; to
7 harmonize provisions; and to repeal the original sections.
8 Be it enacted by the people of the State of Nebraska,
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1 Section 1. Sections 1 to 5 of this act shall be known and may be
2 cited as the Child Care Tax Credit Act.
3 Sec. 2. For purposes of the Child Care Tax Credit Act:
4 (1) Child means an individual who is five years of age or less;
5 (2) Department means the Department of Revenue;
6 (3) Eligible program means a program that is licensed as a family
7 child care home I, family child care home II, child care center, or
8 preschool and operates as a for-profit child care business or is a
9 nonprofit organization under the Internal Revenue Code of 1986, as
10 amended;
11 (4) Intermediary means any organization that distributes funds for
12 the purpose of supporting an eligible program;
13 (5) Parent or legal guardian means an individual who claims a child
14 as a dependent for federal income tax purposes;
15 (6) Qualifying contribution means a contribution in the form of
16 cash, check, cash equivalent, agricultural commodity, livestock, or
17 publicly traded security that is made:
18 (a) For the establishment or operation of an eligible program;
19 (b) For the establishment of a grant or loan program for parents
20 requiring financial assistance for an eligible program;
21 (c) To an early childhood collaborative or another intermediary to
22 provide training, technical assistance, or mentorship to child care
23 providers;
24 (d) For the establishment or ongoing costs of an information
25 dissemination program that assists parents with information and referral
26 services for child care;
27 (e) To a for-profit child care business, including family home
28 providers. The for-profit child care business must use the proceeds of a
29 qualifying contribution for (i) the acquisition or improvement of child
30 care facilities, (ii) the acquisition of equipment, (iii) providing
31 services, or (iv) employee retention; or
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1 (f) To an intermediary for the establishment or operation of an
2 eligible program or for the establishment of a grant or loan program for
3 parents requiring financial assistance for an eligible program;
4 (7) Taxpayer means any person subject to the income tax imposed by
5 the Nebraska Revenue Act of 1986. The term includes resident and
6 nonresident individuals, estates, trusts, and corporations; and
7 (8) Total household income means federal modified adjusted gross
8 income.
9 Sec. 3. (1) For taxable years beginning or deemed to begin on or
10 after January 1, 2024, under the Internal Revenue Code of 1986, as
11 amended, a parent or legal guardian shall be eligible to receive a credit
12 against the income tax imposed by the Nebraska Revenue Act of 1967 if:
13 (a) The parent's or legal guardian's child is enrolled in a child
14 care program licensed pursuant to the Child Care Licensing Act;
15 (b) The parent's or legal guardian's child receives care from an
16 approved license-exempt provider enrolled in the child care subsidy
17 program pursuant to sections 68-1202 and 68-1206; or
18 (c) The parent's or legal guardian's total household income is less
19 than or equal to one hundred percent of the federal poverty level.
20 (2) The credit provided in this section shall be a refundable tax
21 credit equal to:
22 (a) Five thousand dollars per child if the parent's or legal
23 guardian's total household income is no more than seventy-five thousand
24 dollars;
25 (b) Three thousand dollars per child if the parent's or legal
26 guardian's total household income is more than seventy-five thousand
27 dollars but no more than one hundred fifty thousand dollars; or
28 (c) One thousand dollars per child if the parent's or legal
29 guardian's total household income is more than one hundred fifty thousand
30 dollars but no more than two hundred thousand dollars.
31 (3) A parent or legal guardian shall not be eligible for a credit
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1 under this section if the parent's or legal guardian's total household
2 income is more than two hundred thousand dollars.
3 (4) A parent or legal guardian shall apply for the credit provided
4 in this section by submitting an application to the department with the
5 following information:
6 (a) The number of children for which the parent or legal guardian is
7 claiming a credit;
8 (b) Documentation of the parent's or legal guardian's total
9 household income; and
10 (c) Any other documentation required by the department.
11 (5) Subject to subsection (6) of this section, if the department
12 determines that the parent or legal guardian qualifies for tax credits
13 under this section, the department shall approve the application and
14 certify the amount of credits approved to the parent or legal guardian.
15 (6) The department shall consider applications in the order in which
16 they are received and may approve tax credits under this section each
17 year until the total amount of credits approved for the year equals
18 seventeen million five hundred thousand dollars.
19 Sec. 4. (1) For taxable years beginning or deemed to begin on or
20 after January 1, 2024, under the Internal Revenue Code of 1986, as
21 amended, any taxpayer who makes a qualifying contribution during the
22 taxable year shall be eligible to receive a credit against the income tax
23 imposed by the Nebraska Revenue Act of 1967.
24 (2) The credit provided in this section shall be a nonrefundable
25 credit equal to either fifty percent or seventy-five percent of the
26 taxpayer's qualifying contribution made during the taxable year, except
27 that the credit for a taxpayer shall not exceed one hundred thousand
28 dollars for any single taxable year.
29 (3) The credit shall be equal to seventy-five percent of the
30 qualifying contribution if:
31 (a) The eligible program that receives the contribution has a
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1 physical presence in an opportunity zone in this state designated
2 pursuant to the federal Tax Cuts and Jobs Act, Public Law 115-97; or
3 (b) The eligible program that receives the contribution has at least
4 one child enrolled in the child care subsidy program established pursuant
5 to sections 68-1202 and 68-1206 and the child care provider is actively
6 caring and billing for the child as verified by the Department of Health
7 and Human Services.
8 (4) The credit shall be equal to fifty percent of the qualifying
9 contribution if subsection (3) of this section does not apply.
10 (5) A taxpayer shall apply for the credit provided in this section
11 by submitting an application to the department with the following
12 information:
13 (a) Documentation to show that the contribution is a qualifying
14 contribution; and
15 (b) Any other documentation required by the department.
16 (6) Subject to subsection (7) of this section, if the department
17 determines that the taxpayer qualifies for tax credits under this
18 section, the department shall approve the application and certify the
19 amount of credits approved to the taxpayer.
20 (7) The department shall consider applications in the order in which
21 they are received and may approve tax credits under this section each
22 year until the total amount of credits approved for the year equals
23 fifteen million dollars.
24 (8) If a taxpayer's credit under this section exceeds the total tax
25 due, the taxpayer may carry forward the excess credit for up to five
26 taxable years after the taxable year in which the credit was first
27 allowed, but the taxpayer must use the carryover credit in the earliest
28 taxable year possible.
29 (9) A contribution shall not qualify for a credit under this section
30 if the contribution is made to a child care provider in which the
31 taxpayer or a person related to the taxpayer has a financial interest,
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1 unless the contribution is part of a bona fide arm's length transaction.
2 Sec. 5. The department may adopt and promulgate rules and
3 regulations to carry out the Child Care Tax Credit Act.
4 Sec. 6. Section 71-1962, Revised Statutes Cumulative Supplement,
5 2022, is amended to read:
6 71-1962 (1) Not later than March 1, 2014, the State Department of
7 Education shall create and operate the Nebraska Early Childhood
8 Professional Record System. The system shall be designed in order to:
9 (a) Establish a database of Nebraska's early childhood education
10 workforce;
11 (b) Verify educational degrees and professional credentials held and
12 relevant training completed by employees of participating applicable
13 child care and early childhood education programs; and
14 (c) Provide such information to the Department of Health and Human
15 Services for use in evaluating applications to be rated at a step above
16 step one under section 71-1959.
17 (2) When an applicable child care or early childhood education
18 program participating in the quality rating and improvement system
19 developed pursuant to section 71-1955 applies under section 71-1959 to be
20 rated at a step above step one, the child care or early childhood
21 education program shall report the educational degrees and professional
22 credentials held and relevant training completed by its child care and
23 early childhood education employees to the Nebraska Early Childhood
24 Professional Record System for the program to be eligible for a quality
25 scale rating above step one.
26 (3) Any child care or early childhood education provider residing or
27 working in Nebraska may report his or her educational degrees and
28 professional credentials held, relevant training completed, and work
29 history to the Nebraska Early Childhood Professional Record System.
30 (4) The State Department of Education shall develop a classification
31 system for all eligible staff members as defined in section 77-3603 who
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1 are employees of or who are self-employed individuals providing services
2 for applicable child care and early childhood education programs listed
3 in the Nebraska Early Childhood Professional Record System. The
4 classification system shall be based on the eligible staff members'
5 educational attainment degrees and professional credentials held,
6 relevant training completed, and work history and shall be made up of
7 five four levels, with level one being the least qualified and level five
8 four being the most qualified. In order to meet the minimum qualification
9 for classification as level one, an eligible staff member must be
10 employed with, or be a self-employed individual providing services for,
11 an eligible program as defined in section 77-3603 and complete at least
12 twelve hours of in-service training at a licensed child care facility.
13 The minimum qualification for an eligible staff member to be classified
14 as level one shall be a Child Development Associate Credential or a one-
15 year certificate or diploma in early childhood education or child
16 development. The classification system shall be used for purposes of the
17 tax credit granted in section 77-3605 under the School Readiness Tax
18 Credit Act.
19 Sec. 7. Section 77-2715.07, Revised Statutes Cumulative Supplement,
20 2022, is amended to read:
21 77-2715.07 (1) There shall be allowed to qualified resident
22 individuals as a nonrefundable credit against the income tax imposed by
23 the Nebraska Revenue Act of 1967:
24 (a) A credit equal to the federal credit allowed under section 22 of
25 the Internal Revenue Code; and
26 (b) A credit for taxes paid to another state as provided in section
27 77-2730.
28 (2) There shall be allowed to qualified resident individuals against
29 the income tax imposed by the Nebraska Revenue Act of 1967:
30 (a) For returns filed reporting federal adjusted gross incomes of
31 greater than twenty-nine thousand dollars, a nonrefundable credit equal
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1 to twenty-five percent of the federal credit allowed under section 21 of
2 the Internal Revenue Code of 1986, as amended, except that for taxable
3 years beginning or deemed to begin on or after January 1, 2015, such
4 nonrefundable credit shall be allowed only if the individual would have
5 received the federal credit allowed under section 21 of the code after
6 adding back in any carryforward of a net operating loss that was deducted
7 pursuant to such section in determining eligibility for the federal
8 credit;
9 (b) For returns filed reporting federal adjusted gross income of
10 twenty-nine thousand dollars or less, a refundable credit equal to a
11 percentage of the federal credit allowable under section 21 of the
12 Internal Revenue Code of 1986, as amended, whether or not the federal
13 credit was limited by the federal tax liability. The percentage of the
14 federal credit shall be one hundred percent for incomes not greater than
15 twenty-two thousand dollars, and the percentage shall be reduced by ten
16 percent for each one thousand dollars, or fraction thereof, by which the
17 reported federal adjusted gross income exceeds twenty-two thousand
18 dollars, except that for taxable years beginning or deemed to begin on or
19 after January 1, 2015, such refundable credit shall be allowed only if
20 the individual would have received the federal credit allowed under
21 section 21 of the code after adding back in any carryforward of a net
22 operating loss that was deducted pursuant to such section in determining
23 eligibility for the federal credit;
24 (c) A refundable credit as provided in section 77-5209.01 for
25 individuals who qualify for an income tax credit as a qualified beginning
26 farmer or livestock producer under the Beginning Farmer Tax Credit Act
27 for all taxable years beginning or deemed to begin on or after January 1,
28 2006, under the Internal Revenue Code of 1986, as amended;
29 (d)